June 5, 2023



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Sparking Optimism for the Restaurant Industry in the Second Half of the Year

2023 is already halfway through. At the beginning of the year, we witnessed an increasing number of restaurant owners being able to afford their rent. In April, Alignable's rent report revealed a historic high in restaurant rental delinquency rates, accompanied by soaring rents for small business owners in other industries, shattering multiple records.

The good news is that in the just-concluded month of May, the upward trend in restaurant rental delinquency rates has finally reversed. Does this signal a significant reduction in rental pressure for restaurants in the latter half of the year?

Here is Alignable's latest rental delinquency rate report for May, broken down by industry.

According to Alignable's freshly released May report on small business rents, 37% of American small business owners indicated they couldn't fully pay their rent on time this month. 54% mentioned they are paying more in rent than they were six months ago. 14% noted that their rent is at least 20% higher than it was in December.

From April to May, some industries experienced the most noticeable surge in rent delinquencies in 2023. The travel and logistics sectors saw a 20% increase from the previous month, the highest among all industries.

Restaurants saw a slight improvement in May, dropping 5 percentage points from the staggering 49% of April to 44%. Although still a challenge, this represents a step in the right direction.

Rental delinquency rates varied across different regions. Among these, Illinois, New York, Minnesota, Maryland, and California took the top four spots, reaching astonishing delinquency rates of 52%, 48%, 47%, 46%, and 41% respectively. Maryland showed the most significant growth, with an astounding 18% increase.

Unfortunately, the disparities in rent delinquency rates go beyond geographical boundaries. Alignable's research highlighted significant differences between minority-owned businesses and other demographic data. This includes small and medium-sized enterprises operated by people of color and Asian-American owners.

In comparison to the average rate of 37%, over half (57%) of minority-owned small businesses were unable to make timely payments in May. This number jumped 9 percentage points from April's 48%, marking a new high for 2023.

While the nuanced reasons behind this imbalance are complex, a substantial part of it stems from unequal access to funding and severe credit shortages for this group. Research from the Federal Reserve indicates that 30% of Black and Asian-American small business owners struggle to obtain credit, a figure significantly lower at 12% for white business owners.

Returning to the restaurant industry, despite the delinquency rate remaining at a high 44%, which is 10% higher than the beginning of the year, it stands as one of the few sectors experiencing a slowdown in rental delinquency rates amidst intensifying inflation, dropping by 5% to rank second-lowest among all industries.

These data points are instilling greater optimism among more restaurant owners for the future.